/>
X

Malaysia's IT industry to grow, but challenges ahead

2012 will see mobile and cloud continue to lead growth, with country expected to clock US$10 billion in enterprise IT spend. But challenges await, including IT skills shortage and security concerns.
Written by Edwin Yapp on

KUALA LUMPUR--Malaysia's enterprise IT spending is expected to expand further in 2012 with several technology drivers including mobile computing, mobile broadband and cloud paving the way.

According to Gartner, enterprise IT spending in the country is forecasted to reach 31.5 billion ringgit (US$10 billion) in 2012, up 6.1 percent over 2011. Peter Sondergaard, the research firm's senior vice president and global head of research, noted that despite global IT growth slowing from the expected 5.9 percent expansion last year, and the looming economic challenges, enterprises will continue to invest in technology.

"The days when IT was the passive observer of the world are over," Sondergaard said. "Global politics and the global economy are being shaped by IT."

Saurabh Sharma, senior analyst of market intelligence at Ovum, noted that the research house does not track Malaysia' business software and IT services market but estimates the market size to be "in the range of 25 to 30 percent" of the corresponding Southeast Asian (SEA) market.

This region's business software market was worth around US$2.4 billion in 2010 and expected to grow at a compound annual growth rate (CAGR) of 13 percent through to 2015, Sharma said. The IT services market was worth around US$6 billion and expected to grow at a CAGR of 16 percent over the same period.

Nitin Bhat, partner and head of consulting at Frost & Sullivan, pointed out that the region's total IT spending, including Malaysia, was approximately 7 to 8 percent in 2011, with mobility and cloud ready-architecture driving industry interest.

Cloud, mobile computing lead the way
According to Sondergaard, the installed base of mobile PCs and smartphones exceeded that of desktop PCs in 2010. "That's an incredible change, not only for individuals, [as] it requires IT to re-imagine the way it provides applications," he said.

The Gartner analyst noted that by 2014, private app stores will be deployed by 60 percent of IT organizations and the applications themselves will be redesigned to become context-enabled so they can understand the user's intent.

Bhat said as a result of the growth in mobile computing, operator margins are beginning to decline sharply and telcos are struggling to deal with increased costs from having to deal with data deluge.

"With the pervasiveness of smartphones and tablets, there is some anecdotal evidence that the mobile broadband service quality, at least for some operators in Malaysia, has begun to deteriorate," he said. "Volume increase for voice is not as rapid as data, which doubles every 12 to 15 months, and this is creating real challenges for operators."

Elaborating on cloud computing, Sondergaard said it combines the industrialization of IT capabilities and disruptive impact of new IT-led business models.

"What supply chain models did to manufacturing is what cloud computing is doing to in-house data centers, by allowing people to optimize around where they have differentiated capabilities," Sondergaard said.

Concurring, Bhat added that cloud computing continues to gain momentum in the region with the Asia-Pacific market, excluding Japan, expected to grow at 39 percent between 2010 and 2015. He noted that platform-as-a-service (PaaS) is expected to be the new battleground this market.

Challenges lay ahead With the rise of cloud computing, however, Sharma said enterprises will need to ensure greater data security and privacy, especially in the deployment of public clouds.

The Ovum analyst said the integration of on-premise applications with others delivered via the cloud will also be a key priority. Enterprises will also focus on aligning their IT investments to the overall business goals and near-term business and technology priorities, he added.

In addition, he pointed out that Malaysia faces a shortage of skilled IT manpower required to support the growing needs of the ICT initiatives and the challenge will remain, at least, in the near-future.

Sharma said: "On a regional level, there are several factors that are inhibiting the emergence of Malaysia as a datacenter hub--security, privacy, cost of labor and reliability, being the key ones."

Frost & Sullivan's Bhat noted that with the continued proliferation of mobile computing and broadband, operators will have to rethink several elements in their business model this year. For example, they will have to determine if they can continue to offer unlimited data plans or provide these service plans at higher price points, or charge higher service fees to prioritize premium customers at the expense of others, he said.

In a recent study commissioned by Tellabs, the networking gear maker concluded that the dual forces of escalating costs and falling revenues of most operators worldwide would result in an "end of profit" phenomenon by 2015. Tellabs defines end of profit as the point at which capital and operating costs required to run a network exceed revenue.

"With all-you-can-eat plans on offer today, the revenue remains the same but cost of bandwidth will continue to increase," said Wong Kian Soon, the company's regional manager of strategic network consulting. "This will lead to a day when cost will go beyond revenue, hence, the end of profit for mobile operators."

The Tellabs study also revealed that profits for operators in western markets could potentially end in fourth-quarter 2013, while advanced Asian markets such as Australia, Singapore, Japan and Korea will experience the same in third-quarter 2014. Malaysia has a buffer of about one to two years more than that of advanced Asian market, Wong said.

Edwin Yapp is a freelance IT writer based in Malaysia.

Related

Apple politely explains why iPhone cases are a waste of money
Apple iPhone 13 Pro Max

Apple politely explains why iPhone cases are a waste of money

Apple
The 8 best iPhone models of 2022
iphone-12-models.png

The 8 best iPhone models of 2022

iPhone
Delta Air Lines just made a callous admission that customers may find galling
screen-shot-2022-07-18-at-5-18-46-pm.png

Delta Air Lines just made a callous admission that customers may find galling

Business